STUART VARNEY, GUEST HOST: The clock is ticking as Congress debates tax hiking. But if there is still no fiscal cliff deal well into December, will Republicans still stick to their guns when it comes to those hikes on the wealthy?

VARNEY: Don't want to offend you, sir, but here's what I think is going to happen.

HATCH: OK.

VARNEY: Come the end of December, if there's no deal, President Obama will say, hey, you Republicans, you're going to send America over the cliff into recession just because you are defending your rich millionaire pals. Back off. And, you, sir, I suspect, will cave.

HATCH: Oh, I don't think so.

The fact of the matter is, is that neither side should allow this to happen. But it's going to take good presidential leader. If it doesn't happen, it will be because of a lack of presidential leadership, because the Congress itself just can't do what has to be done.

(CROSSTALK)

VARNEY: But he won the election and the Democrats increased their size in the Senate and the president did, indeed, campaign on raising tax rates on the rich.

When push comes to shove, you think you can avoid doing that, you think you can head him off and negotiate away from tax hikes on the rich?

HATCH: Well, we hope so, because none of us are for rate increases.

We are for finding enough revenue to satisfy the president in the code itself. I think that's something we can do. But to raise the rates would hit a million small businesses and lose about 700,000 jobs. We believe it's not the right thing to do and it could throw us into another recession if we don't watch what we're doing.

Plus, everyone knows, unless we do something about the entitlement programs, that's where the real problems are, we are not going to be able to solve these problems. And the Democrats know that, but they just seem to be unwilling to do anything in that area that they know has to be done.

CAVUTO: What would you cut? What would you do with entitlement programs? How would you cut?

HATCH: Well, first of all, we know that we are going to have to resolve Social Security. It's $18 trillion, an unfunded liability. It's the easiest of the things to fix. We could fix that.

(CROSSTALK)

VARNEY: How?

(CROSSTALK)

HATCH: You know you're going to have to raise the retirement age and you will have to do a few other things, including, including use a better system, so that those on the top level do not rise as fast as those on bottom level.

I think almost any Democrat should agree with that. With regard to Medicaid and Medicare, we know they're both in terrible trouble. Medicare is almost $40 trillion, an unfunded liability, as we are talking.

Medicaid is almost that bad. And the states are having a heck of a time meeting Medicaid payments. And what does the president do? He pushes 22 million more people on the Medicaid rolls throughout the country and the states are up in arms about it and do not know what to do about it.

Of course the president said they'll pay for it for the next three years from the federal government, but with what? We are broke. See, these are problems that really Democrats and Republicans and the president should come together. You cannot solve these problems without really strong presidential leadership.

VARNEY: If I return to the issue of raising tax rates on the rich, are you dead set against doing it, period?

HATCH: Yes, we are, and I'll tell you why, because there are a million small businesses or pretty close to a million small businesses that would be drastically hit.

And not only that, but you're talking almost a million jobs, really, from somewhere over 700,000 jobs that would be lost if we did that.

VARNEY: But you risk the blame for a recession. The president would say, look what you did. You protected your millionaire pals and now we've got a recession. It's your fault. He would say it.

HATCH: Wait just a second.

We know that before we're going to get anything accomplished here, we're going to have to reduce spending. And our problem, as Republicans, is, yeah, they always, the Democrats always want to increase rates on the promise that they'll cut spending, and the spending cuts never occur, the rates go up, and they keep spending and we get even deeper in debt.

Look, I'm saying, without presidential leadership, this cannot be done. With presidential leadership, it can. And I think Republicans would work with the president to get it done. If he's dynamic enough and really wants to do it and can really corral his people on his side and get them to work with us.

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